fiscal cliff

Peter Radford / Economics / austerity, business investment, consumption, demand, economic policy, fiscal cliff, inventories, plutocracy, real estate, trade, unemployment / 0 comments

Update On The Economy

November 29, 2012

It’s been a long break occasioned by a string of visitors. What happened in the interim? Not a whole lot. Washington is now deeply immersed in the three ring circus known as the fiscal cliff, an event, we are told, so horrendous that we all ought to be prepared to sacrifice our preconceived notions of fairness in order to rush helter-skelter into a fudged ‘grand bargain’.

No thanks.

Meanwhile the economy muddles along.

It would be nice to see some of the energy being directed towards the entirely pointless fiscal cliff activities being diverted and put to better use. Like getting the economy onto a secure, sustainable growth path. In my dreams.

Still the economy is hobbling along by itself. Today we read the latest GDP numbers. This is the second estimate and represents quite a jump up from the first. According to the report GDP grew 2.7% during the third quarter, up from 1.3% in the second and 2.0% in the first. So on the face of things the economy appears to have picked up the pace.

The problem with this is that the first estimate of the third quarter had consumption considerably higher than the 1.4% in the current version. Likewise business investment, excluding inventories, actually declined rather than increasing as was reported before. These are signs of weakness not accelerating strength, so the top line numbers are somewhat deceiving.

Looking more deeply into the data it becomes obvious that much of the apparent strength during the third quarter came from inventory accumulation. This is an ambiguous source of growth. The question we need to ask is what caused businesses to build up their stocks. If it was anticipation of demand, then it might signal continued good growth. If it was an error created by a miscalculation of demand it may signal a retrenchment ahead and weakening growth. Nothing is ever simple. Looking through the lens of subsequent activity, especially reports of strong sales during the early part of this holiday season we can – for the moment – speculate that it is the former reason, not the latter. It looks as if businesses built stocks ahead of stronger sales, got the call right, and that activity will continue at a more rapid pace.

When we deconstruct the 2.7% overall growth we find it has the following components:

Personal consumption contributed +1.0%

Private investment contributed +0.1%

Inventory change contributed +0.8%

Net trade contributed +0.1%

Government spending contributed +0.7%

You can see clearly from this list the significance of inventories. Everything else looks a little weak.

Elsewhere today we heard about new claims for unemployment assistance. They fell dramatically, by 23,000, to 393,000 last week, and down from the 451,000 of a couple of weeks ago. Once again I urge caution. These numbers are highly skewed by the effects of hurricane Sandy and are not a reliable barometer of the economy. It will take a while for things to settle down, by which time we will be into the funny numbers of seasonal employment. Of course the data is seasonally adjusted, but there are always blips that obscure trends. So don’t go celebrating today’s report, it is simply part of a return to normality, rather than an indicator of a new, stronger, normality.

Looking further afield we also heard about pending home sales which rose 5.2% in October, the eighteenth straight month of gain. Pending sales are now 13.2% higher than a year ago and continue their long road to recovery. As a comparison: this level of activity is roughly the same as that in late 2001, which is decent, not great, and not frenzied. We can safely say that real estate is back on its feet, albeit at much lower levels of activity than those reached during the insanity of the bubble years. Let’s hope it stays that way.

Finally, let me return to the fiscal cliff.

It is a contrived problem designed to scare us. Of course we don’t want a dramatic tightening of fiscal policy next year. That would be awful. But we must not forget that we do not have a Federal debt problem. At least not now. The annual deficit as a percentage of GDP shot up exactly as we would expect during a deep recession. It went from an order of magnitude of about 1.2% to around 9.0% of GDP. This explosion was predictable and temporary. Once growth is re-established it will decline back to its former levels of its own accord. No significant policy changes are needed. Remember: non-health care transfer payments have been a fairly constant proportion of GDP for decades. They rise during recessions and then fall back subsequently. Absent health care, transfer payments are not a cause of our supposed debt problem. By the way: defense spending has been a reasonably steady proportion of GDP as well. This irks me and others who would like to build a case to cut it, but that case has to rest on non-budgetary reasoning, not on false debt crises.

So, if the fiscal cliff is a made up problem, who made it up? and, why?

The fiscal cliff is an artifact of class war. It arises from the longstanding attempt of the political right wing to defund and shrink government, deregulate, and boost business profits. Hacking away at the safety net is simply part of that long term plan. Likewise the horror stories on the left are all designed to fight a rearguard sufficient to protect the safety net from the predation of our plutocracy. We happen to be living through a moment when the right came close to winning. They were perilously close to ramming through more tax cuts for the wealthy to be paid for by stripping funding from social programs. The result of this would be the long term impoverishment of the middle class and the continued enrichment of the top tier of income earners. So these are tense times when compromise is dangerous and thus difficult.

In this sense the fiscal cliff is also the first battle in a war designed to tackle inequality. Hence the obsessive focus on raising taxes on the wealthy, even though such an increase is insufficient to make much of a dent in the long term deficit.

In other words, the fiscal cliff is a political construct that results from our deeply divided views on social policy. It has less economic significance other than the near term negative shock it would deliver were all its aspects to come to pass.

Ironically, as I have pointed out before, anyone who is alarmed at such a negative shock is, by definition, making the statement that they see benefit in stimulus. For if sudden contraction in fiscal policy is capable of sending the economy into recession, as they argue, then sudden expansion of fiscal policy will drive the economy out of recession. The fiscal cliff rhetoric thus hides a stunning level of agreement. Apparently, and perhaps unwittingly, our right wingers are now ardent Keynesians.

Similarly, anyone who has made a fuss of the damage to inflationary potential of large deficits and government spending should now be applauding the imminent slashing of spending incorporated within the fiscal cliff packages. Think of the rating agencies. They are an example of the confusion on the right. On the one hand they warn us that failure to resolve the fiscal cliff issues will force them to downgrade US bond ratings. On the other they claim that reduced spending is a criterion for getting a higher rating. But the fiscal cliff would produce exactly such reduced spending. Clearly they don’t mean reduced spending. They mean reduced social spending. They have declared their ideological colors.

So we hear no applause, nor do we see consistency.

Which is why I make my claim about class war. The fiscal cliff is artificial. It exists as a ploy by the right to hack away at social spending. The rational response is thus to drive off the cliff, and then to negotiate backwards. This would make the right the fall guy for a hike in taxes on the middle class and consequently provide a major incentive for them to bargain quickly to undo the damage.

All this is my way of saying: tune the fiscal cliff blather out and enjoy the upcoming holiday season!

But wouldn’t it be nice were Washington to tackle some of our real problems instead of the mad up ones? Oh well. Dream on.

Peter Radford / Economics / austerity, fiscal cliff, GDP, government spending, health care, Keynes, Simpson-Bowles, Social Security / 0 comments

Down The Fiscal Rabbit Hole

November 14, 2012

A few quick things on the current hyperventilation regarding the so-called ‘fiscal cliff’.

It isn’t a cliff.

Not at all. It is a roll out of a series of things that have cumulative effect, but which can be undone over a sensible timeframe. There is no sudden drop-dead moment when the lights go out. Yes, the Bush tax increases come into effect. And note my language: this is a tax increase imposed on us by the Republicans under George Bush. It is the offset to his disastrous tax cut. So it is an increase. Moving on: that increase hits everyone on January 1st. But since its impact will be on the amount deducted from incomes, its full impact will accumulate through the year. Households will react to the loss of purchasing power at different times throughout 2013, so there is no single moment when the impact smashes into GDP. There is no cliff, but there is a steady slide.

All that cash withdrawn from paychecks will suck demand from the economy. That means that sometime in 2013 we will most likely head into recession. This is what vexes business and is why it now has found its anti-austeirty voice. I find this amusing for the simple reason that by getting into a tizzy over the loss of demand big business has declared its allegiance to Keynes. Anyone who worries about the impact of a rise in taxes on GDP, and concludes that such an impact will be the loss of demand and hence will lead to contraction, is a Keynesian. Pure and simple. Notice also that this position implies that big business is not concerned that the deficit is too high. Postponing tax increases means the deficit will go up, not down. Since that’s what big business is now calling for, they are actually arguing that the deficit might be too small, not too large. Nice huh?

No it isn’t possible to raise revenues and lower tax rates at the same time. At least not if narrowing the deficit is your goal. Tax rates are already too low. Especially on high income earners. Rates need to go up. We have defunded government, we have not expanded it. We can afford what we spend once we get rid of that defunding effort. Our social programs have not suddenly become too much of a burden, we have deliberately stopped paying for them.

This was, of course, a long term strategy driven by the right and not opposed by a compliant left. Both parties sat at the table when the game was played. One wanted to eliminate entitlements by defunding them and then crying about our inability to pay for them; the other was too timid to fight back. Indeed, under Clinton, the so-called left actually added to the defunding momentum.

Oh and all this talk about raising revenues through closing loopholes is daft. Each loophole is well defended by an army of lobbyists – usually the people who bought Congress to put the loophole there in the first place – so it isn’t credible to imagine we will close many, if any. Besides the biggest loopholes are those that fund the middle class: the antiquated subsidy of home owners via the tax credit in mortgage interest, and the deduction they get for state, local, and property taxes. These aren’t listed as outlays in the budget because no one wants to embarrass the middle class by showing how much welfare gets pumped into it each year. So they are buried in the budget reports and called ‘tax expenditures’. Any drive to raise revenues without raising rates will have to do away with such things. Thus middle class taxes will go up significantly. The ruse of keeping tax rates down is simply so that the Republicans can save face with their rabid base. Taxes are going up one way or another.

One last thing: the fear mongering talk about ‘cliffs’ is designed to make it difficult to defend entitlements. It also means that debate will be truncated. In that fervid atmosphere mistakes will be made, which is why we all ought to slow things down and avoid hyperbole. In the midst of such an artificial crisis things like Social Security become sitting ducks. Already we are hearing talk about raising the retirement age again. This is because life expectancy has risen way beyond what it was when the program was introduced. Alan Simpson of Simpson-Bowles notoriety is a major advocate of such a move. He has been an outspoken opponent of entitlement programs since his election it Utah. Of course he doesn’t have to worry. His twenty years in Congress earned him lifetime health benefits and a full pension. He just thinks other sought to work longer and harder to get what he has. Sounds fair, right?

Let’s think twice though. This is because much of the increase in life expectancy is an illusion.

Yes we live longer on average. But much of the increase in overall life expectancy comes as a result of better care for infants, making life expectancy at birth much higher than it used to be. But it is that portion of life beyond retirement that we ought focus on, and which represents the actuarial problem, so gains made for infants are irrelevant. When we focus this way, we find that the gain is much less, indeed for low wage earners the gain is minimal. So the increase in retirement age from 65 to 67 has already solved a considerable part of the problem – such as it is – and little more is needed. The actuaries calculating the retirement age saw this coming as far back as 1946. And in the revamp of 1985 they nailed it. What they missed, though, is the inflation of incomes. The payroll tax funding the program has a cap of around $110,000. Incomes above that level are free of payroll tax. Adjusting for the underestimate of the impact of inflation on incomes by removing that upper cap or raising it significantly is all that is needed to solve the program’s minor difficulties.

Medicare is a whole different issue. There the problem is the lack of cost control and low productivity in the health care industry. Bending the trajectory of future cost increases is the primary goal, and, parenthetically, the last year or two have seen major strides in that direction – health care cost have risen more slowly, so we need not panic.

And this ought be our theme throughout: no panic. There is no cliff. The world will not end if we don’t hammer out an urgent bargain. We can afford to be sensible on this one. So don’t listen to the hyperventilating pundits. They’re the ones who called the election close. They were wrong then. They’re wrong now.

Stay calm.

Peter Radford / Economics / economic policy, elections, fiscal cliff, GDP, government spending, Obama, plutocracy, Republicans, Romney, tax policy / 0 comments

The Answer Is: No

November 9, 2012

Huh?

No appeasement.

We have already moved on from the Democrats sweeping victory in Tuesday’s election. And have no doubt the win was indeed sweeping. The margins were small in some states, tiny in Florida, but that they existed at all is the fact to focus on. Obama ought never have won this election. The economy is weak and unemployment still lingers in a zone that, in the past, spells doom for incumbent presidents. But he won. Handily. Not only this, but in a year when the Democrats were expected to lose control of the Senate they actually added to their majority.

Something went horribly wrong for the Republicans. It wasn’t that Romney, despite his vaunted business and analytical acumen, ran an ineptly organized campaign. It was, to put it bluntly, a day of reckoning for the extreme right. Their wild eyed radical agenda, from their misogynistic views on social issues, to their emphasis on ever more defense spending, on through to their open desire for the wholesale destruction of entitlement spending, was rejected. It was rejected wherever is was explicit. It was rejected in toto.

Yet a legacy of Obama’s own inept management of his early years was that in 2010 Republicans surged into power at the state level. This allowed them to rig upcoming Congressional elections via the time honored tool of re-drawing the boundaries of Congressional districts in order to make them Republican friendly. This paid off handsomely on Tuesday. Despite being handily beaten at the polls in terms of numbers of votes cast, the Republicans kept hold of the House.

So we enter the next two years with a split government.

This has brought forth a rush of calls for Obama to make a deal with the Republicans on the so-called upcoming fiscal cliff. This is the self-inflicted budget crisis that is also a legacy of the deadlock we suffered through during the last four years and in particular is a result of the breakdown in negotiations over budget policy in 2010 and 2011. Basically the ‘cliff’ is a term describing a series of spending cut and tax increase measures that automatically come into law on in January 2013 unless alternative, and presumably more sensible, measures are agreed to beforehand. With beforehand meaning the next few weeks.

The danger of rushing to cut a deal in a few weeks – a deal that would re-define our tax and spending profile for the best part of a decade – is that there is no time for a considered discussion. A grand bargain of such importance surely needs to be the outcome of a few months not a few weeks of negotiations.

Worse, the psychology of such a compressed debate gives the upper hand to the extremists who can force concessions from their more moderate counterparts by waiting to the last moment to make a deal. Brinkmanship becomes the order of the day and undermines the likelihood of the ultimate bargain not containing some very bad deals.

This, of course, is less of a problem were Congress not infested with a phalanx of Tea Party extremists.

Therein lies the reason for no appeasement.

The central problem we all face as we seek to strike a deal on the budget is that the extreme right is not concerned about the deficit. Despite what they say publicly about burgeoning debt and other right wing red flags, they have never been worried about the level of debt or the size of the annual deficit. These issues are simply a veil over the real agenda: the destruction of the welfare state. In recent decades it has been the Republican Party responsible most for the emergence of a long term rise in the deficit. First under Reagan and then under George W. Bush they forced through massive reductions in government revenues without tackling a concomitant cut in spending. Reagan oversaw a massive defense build up that was paid for, not through taxation, but through borrowing. Then, after Clinton had stabilized the budget and even produced a rather lucky surplus, Bush used the existence of that surplus to argue that the government was taking in too much revenue and thus could cut taxes. He cut taxes way beyond the level needed to balance the books. In a deliberate effort to defund government and thus produce a budget crisis he cut taxes drastically in two rounds. Each added to the deficit. Each was supported wholeheartedly by the entire Republican delegation in Congress.Some of those Republicans, in a stunning volte face, have become the most vocal champions of deficit reduction. So we know that the Republicans do not worry about deficits. Recall it was Dick Cheney who said that deficits don’t matter.

Creating a funding crisis was the goal. It was a strategy that succeeded and then some when the economy fell to pieces and the long term deficit was compounded by the normal short term deficit associated with a recession. The extremists had set the game up perfectly for themselves. The chatter amongst our elite became the burden represented by the entitlement programs whose cost now looked unbearable in the context of all that lost revenue. Social Security was quickly branded as being on the verge of bankruptcy. Medicare was declared impossibly costly. The handwringing began. Earnest and sober people began to regret the harsh reality that America could no longer afford the New Deal and New Society programs. Yes, we were told, we would like to protect the poor, the young, the elderly, and the sick, but we just can’t afford it anymore. Something has to give. Someone has to pay the price for America’s diminished fiscal capacity. Just not the wealthy job creators and their friends in Wall Street.

Thus the sick, the poor, and the elderly, and the children were singled out for punishment. They were to be sacrificed so that we could get our fiscal house in order.

All the pronouncements, reports, and analyses that have flooded Washington these past two years as we began the debate over the budget have had the same target. All have taken as a truth that we have a diminished revenue raising capacity. Yes they have all talked about raising revenues, but they all, ultimately, throw the burden on the same target: the weakest parts of our society.

In other words the enormity of the Republican Party’s cynical strategy has been overlooked. The radical agenda is perilously close to being fulfilled. Had Romney won on Tuesday victory for the far right would have been certain. The credit markets and the plutocrats would have protected their privilege and the rest would have been made to pay.

But democracy is a funny thing. It gives the weak a chance to express what they think.

And they thought poorly of the entire radical right’s enterprise. They realized that they were being sold a bill of goods. Only one in ten voters mentioned the deficit as an issue. Seven in ten thought job creation was the priority. In my mind that’s a fairly good indicator for what public policy ought to be doing.

Stimulus. Not austerity.

So. As we are rushed headlong into this unnecessary panic called the ‘fiscal cliff’ we ought to listen to the voters.

Say no to cuts in entitlements. No.

Do not allow this artificially and carefully crafted moment be the excuse for ending the welfare state.

No appeasement of extremists. It never works. They always want more.

If that means going over the cliff, so be it. There is nothing that cannot be undone later. Let taxes go up. Put the blame on the intransigence of the right. Then cut them back where needed and bask in the victory of handing a tax cut to the middle class. Raise capital gains tax to the same level as income tax. After all income is income so tax it all the same. Stretch the tax code out progressively. After all the research shows definitively that higher taxes on the wealthy has no effect on the economy. Fix the tax code to plug loopholes for big business. Use the revenue to lower tax rates if you want. Get rid of the cap on payroll taxes to juice revenues into Social Security, but extend last year’s payroll tax cut as a stimulative measure. The list goes on.

But never, ever, appease the extremists. This is their last chance to execute the Reagan/Bush agenda. This is our chance to end the entire Reagan era. The stakes extend way beyond the mere budget. This is the time to re-define the American social contract.

So start by resisting the temptation to rush into a hasty deal.

The answer is: no.

Peter Radford / Commentary / fiscal cliff, Obama, Romney / 0 comments

Election Aftermath

November 7, 2012

Well now. There’s a thing.

I have spent the day so far corresponding with friends about last night’s historic win for Obama and the Democrats. Here’s a synopsis of my thoughts thus far:

America has changed, and is changing more. The Republicans were trounced wherever they ran up against a diverse voter base. Obama won astonishing margins amongst hispanic voters. In some places his margin of victory within that demographic was 90 – 10. Nationally his margin was 75 – 25 of latino voters. Given that this is the fastest growing demographic in America the importance of this cannot be understated. It was the hispanic vote that won him Virginia, Nevada, and Florida and ended Romney’s chances. Add to this the enormous advantage Obama had with both women and under 40 voters and the electoral college map looks grim for future Republicans. If Florida and Virginia steadily drift into the Democrat’s orbit because of the hispanic demographic, it is hard to see where the Republicans could gain an offset.
This is particularly true if the ‘rust belt’ states remain solidly blue. One of the major stories this election was the perception that Obama’s weakness with white working class voters would make the ring of rust belt states – Ohio, Pennsylvania, Wisconsin, and Michigan – a vulnerability. The auto-bailout put an end to that. Indeed Ohio’s economy has recovered more quickly than that of the nation, giving Obama a key advantage Romney could not overcome.
The steady mantra that Obama would lose the white vote was wrong. It broke differently in a region al pattern. In the more liberal Northeast Obama won a majority within the white population. Elsewhere he tied or lost it marginally. Only in the deep south did he get thoroughly beaten. He lost the white vote there by an astonishing 50 points. Clearly the racially charged Confederacy lives on.
Social conservatism and the so-called cultural wars will ebb. Right across the country a series of plebiscites and lesser elections produced defeats for social conservatives. Pro-life and right wing religious candidates for the Senate lost in erstwhile solid Republican states. Gay marriage initiatives won in three states. The Tea Party and its extreme activists have now cost the Republicans – by my count – at least five winnable Senate seats since 2010. Given that the Democrats now have a 55 – 45 majority in the Senate, it is fair to say that extremism has cost the Republicans dearly. A day of reckoning within the party is due.
Worse for the Republicans: whereas earlier this year they were widely tipped to win control of the Senate they actually lost ground, and – this is what stings them the most – a few of the new Democrats are more liberal than the people they are replacing. The tone of the new Democratic caucus is to the left of its predecessor. This is especially obvious in Massachusetts where a Democrat, Elizabeth Warren beat out a Republican incumbent. She is, as we all recall, the most vocal pro-consumer voice in Washington. That she now has a Senate presence is a blow to plutocracy and a boon to bank reformers. She is also, given her academic background, the Senate’s foremost expert on the economic and social issues facing the middle class.
As a portent of things to come: For the first time in 80 years California has a the same party with super-majority advantages in both it state Senate and House. The Republicans were trounced on the back of the Latino and minority votes. Only 30% of the population aligns with the Republicans – the lowest level ever recorded. The astonishing and steady collapse of the GOP in California is something we all need to think about. At one point it was the model and poster child for Reagan era policy making. It led the tax revolution. It was the first state to destroy its education system via deliberate defunding. It’s tax cutting was legendary and has produced an epic budget problem of Greek/Spanish proportions. And now that has all changed.
As for issues: it is startling to read the polls tell us that fewer than one in ten of voters worry about the budget deficit. Those who were worried about jobs voted strongly for Obama. All the media and elitist focus on the so-called fiscal cliff just doesn’t resonate with voters. They are focused on more immediate problems and want to see the deficit addressed after jobs. Likewise there is a palpable unease about inequality. The exit polls showed a decided concern about the perceived loss of opportunity and the bias in recent policy making towards big business and the wealthy. These opinions open the door to a much more progressive second term for Obama should he take the opportunity.

The sum of all this has both short term and long term implications.

The immediate focus in Washington is going to be on the fiscal cliff. This is, in my opinion, both foolish and unnecessary. Any number of legislative tricks are available to punt the problems down the road so that a more considered discussion can take place. First in that discussion ought to be the recognition that the deficit needing to be addressed – if at all – is much smaller than the total. As the economy recovers the deficit will decrease of its own accord. The big problem is within health care, and the recent reform looks set to hold that under reasonable control. Elsewhere Social Security is much less of a problem and thus the fix also less. My concern is that, in an effort to build consensus, Obama trades away unneeded reform of entitlements for tax increases or tax reform. Fortunately the leftward shift in the Senate will act as a brake on any such machinations. We are not off to a good start. This morning, Mitch McConnell already announced his implacable opposition to compromise. He put the entire onus on Obama as if the Republicans had won.

Plus ca change?

The longer term is more speculative obviously. But that demographic shift is undeniable. It will force the Republicans to be both more urgent in the near term to reach their radical goals, because if they fail, which as I have indicated is likely, they will be pushed into giving up parts of that agenda. This will cause a soul searching and a bout of ideological infighting the upshot of which may well be a series of further election losses until the extremist wing of the GOP no longer dictates to the rest of the party. I don’t think we have arrived at a moment of such reality. The more likely scenario is that the Tea Party presses for more control with a stress on allowing only ‘pure’ Republicans near the national ticket. The combination of shifting demographics and continued losses will eventually recast the Republicans – America has already changed, eventually even the GOP must catch up.

Until then the coast is clear – or clearer – for a definitive new era to emerge. The Reagan/Clinton/Bush era is now behind us. What the major characteristics of the new era will be is yet to be determined, but yesterday’s election gives us the direction in which we will move.

Peter Radford / Economics / business investment, consumer confidence, consumption, fiscal cliff, GDP, government spending, growth, trade / 0 comments

Modest Growth – Very Modest

October 26, 2012

Under normal circumstances – who can remember when they were? – GDP growth of about 2% would be looked at as something of a failure, but for a long time now anything in the 2.0% to 2.5% range has been regarded as an optimistic target. Such are the consequences of a bloated financial sector.

This morning’s preliminary report on third quarter growth has GDP chugging along at an annual 2.0% rate, which is the par I have been suggesting we ought shoot for all year. This marks a decent jump up from the second quarter’s 1.3%, but is nothing to shout about.

The most significant contributor to the increase was personal consumption which edged up from 1.5% to 2% quarter to quarter. This fits well with the other data we have been seeing lately. Rising confidence, a slightly more secure labor market, and the end of falling home prices all seem to be having a positive effect. Retail sales have risen across the board and households appear to be willing to go out and spend.

Whether they will – or can – continue this will depend on more improvement in employment and a return to some semblance of wage growth. And therein lies the rub. Wages have stagnated for so long for the average family that I seriously doubt we can accelerate personal spending much above its current tawdry rate. The division of the spoils garnered by improved productivity have mostly gone to profits in the past few decades. That has led to a massive reduction in household spending potential, and consequently has reduced the upper limits on GDP growth. The tensions that arise from the skew towards profit at the expense of wages reverberate throughout the entire economy. It sits at the heart of our rising inequality; it leaks into politics in the form of plutocratic defense of privilege; it distorts capital allocation via the financial system’s self indulgence; it lowers the arc of future standards of living; and it encourages specious discussions of the ‘end of growth’, which is a very fertile literature at the moment.